Balanced regulations help U.S.

As former colleagues of Edith Ramirez in our respective roles at the Department of Justice, the FTC and the United States Patent and Trademark Office, we commend President Barack Obama’s elevation of her as chairwoman of the Federal Trade Commission. Her wealth of experience advising private businesses and municipal utilities, in addition to her service as an FTC commissioner, make Ramirez an excellent choice to lead the commission.

Ramirez’s commencement of her new duties comes amid an international policy debate of crucial interest to U.S. jobs, investment, companies and economic growth. Private investment has produced the stunning technological advances behind smartphones and high-speed wireless networks, transforming how we communicate and access information. But with many billions in investments and profits at stake in these rapidly changing markets, an intense arm-wrestling match is currently underway between innovators and implementers, between investors in research and development — and users of that R&D. We are all ringside observers of the headline-grabbing “cellphone wars” lawsuits involving big global players, but also in calls for regulatory intervention. This debate matters to America.

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A central feature of the regulatory policy debate involves standards-essential patents. SEPs are patents covering the core innovations that make possible many products we rely on in everyday life — the inventions that make our cellphones and portable music players work, and work with one another nationally and globally. It takes the patented inventions of many companies to make our cellphones work, but these companies agree, through standards-setting bodies, to make the necessary patent licenses available on “fair and reasonable” terms. Standards and “fair and reasonable” licensing agreements have been around for decades, but today, they have become the center of this policy — and money — debate.

The current argument presumes a tension between the interests of innovators (traditionally protected by patent law) and competition (traditionally protected by antitrust law). Recent actions and statements by the FTC have been perceived as taking sides in this false dichotomy, diminishing the rights of patent holders in license negotiations and increasingly tasking judges and arbitrators to become royalty “rate regulators,” with royalty rates for SEPs set by judicial dictate instead of by commercial market-based negotiations between industry participants. If this direction continues, it inevitably will reduce incentives for the investments necessary to produce the next generation of innovations.